- The US dollar index settles about 106.40, and it hovers near its lowest levels in 2025.
- Traders expect price discounts, with the pricing of the federal reserves now in two discounts of 2025.
- US President Trump confirms 25 % definitions on Canada, Mexico and the European Union, but it delays the implementation until April.
- Markets are awaiting personal consumption expenses (PCE), the preferred inflation scale of the Federal Reserve, on Friday.
The US dollar index (DXY), which tracks the performance of the US dollar for a basket of six major currencies, is trying to have a modest recovery on Wednesday but is still near the lowest annual at 106.50. Traders continue in the weight of the increasing expectations of the Federal Reserve (Fed) and the latest developments in customs tariffs by US President Donald Trump.
Digest Market Mark: US dollar stability with high tariff tensions
- The US dollar proves about 106.40 as merchants who escalate the risks of tariffs and the increasing expectations for the reduction of the Federal Reserve.
- On the tariff front, President Trump confirms the definitions of 25 % on Canada, Mexico and the European Union, but delayed its implementation until April.
- On the Federal Reserve Front, markets are now expecting price discounts in 2025, which represents a shift from previous FBI’s guidelines.
- Merchants await personal consumption expenses on Friday (PCE), the preferred inflation scale of the Federal Reserve.
- Personal income and spending reports due this week may increase market expectations.
- The US GDP numbers in the United States Q4 will provide an insight into the momentum of the economy that is heading to 2025.
Technical expectations: Dxy: fights bulls for control
The US dollar index is trying to recover above 106.50, but the momentum is still fragile. The simple moving average is established for 100 days (SMA) at 106.60 main resistance levels, while continuing technical indicators in the homosexuality.
The RSI indicator (MACD) indicates the continuous negative side pressure. If DXY fails to restore 106.60, more decrease can be achieved about 106.00. The bulls need stronger stimuli to restore control, with the level of 107.00 as the next upper key barrier.
Common questions about inflation
Inflation measures an increase in the price of a representative basket for goods and services. The main inflation is usually expressed as a change in percentage on a month on a monthly (illiterate) basis on an annual (annual) basis. Basic inflation excludes more volatile elements such as food and fuel that can fluctuate due to geopolitical and seasonal factors. The basic inflation is the number that economists focus on and is the level targeted by central banks, which are assigned to maintaining inflation at a controlled level, and is usually about 2 %.
Consumer price index (CPI) measures changing commodity and services basket prices over a period of time. It is usually expressed as changing a percentage on a month basis on a monthly (illiterate) basis and on an annual basis (YOY). Core CPI is the number targeted by central banks as it excludes food and flying fuel inputs. When the basic consumer price index rises above 2 %, it usually leads to high interest rates and vice versa when less than 2 % is less than 2 %. Since high interest rates are positive for the currency, high inflation usually leads to a stronger currency. The opposite is true when the inflation falls.
Although it may seem intuitive, high inflation in a country pays the value of its currency and vice versa to reduce inflation. This is because the central bank usually raises interest rates to combat higher inflation, which attracts more global capital flows from investors looking for a profitable place to enter their money.
Previously, gold was the assets that converted investors into high times of inflation because they have maintained their value, and while investors will often buy gold for their safe properties in times of extremist turmoil in the market, this is not the case most of the time. This is because when inflation is high, central banks will put interest rates to combat them. The highest interest rates are negative for gold because it increases the costs of maintaining gold in assets that bear interest or placing money in the calculation of cash deposits. On the other hand, low inflation tends to be positive for gold because it leads to low interest rates, making the bright metal a more applicable investment alternative.
